Question

M makes a promissory note payable to the order of P in the amount of P3,000. P negotiates the note to A, who with the consent of P, raises the amount to P30,000 and thereafter endorses it to B, B to C and C to D, a holder in due course. In this case

A. D can recover P30,000 from M
B. D can recover P3,000 from M
C. P and A are liable to D P3,000
D. B and C are not liable to D

Answer 1

In this case, D, as a holder in due course, can recover only P3,000 from M, which is the original amount of the promissory note before it was fraudulently altered. P and A are liable for the alteration, whereas B and C's liability would depend on further details. The correct answer is B. D can recover P3,000 from M.

Step-by-step explanation:

The student's question involves a scenario where M makes a promissory note payable to P, with an amount raised fraudulently from P3,000 to P30,000 by A.

This question addresses the rights and liabilities of parties in a negotiable instruments transaction. D, a holder in due course, may recover the amount of the instrument, but because the note was tampered with, D can only recover the original amount of P3,000 from M.

This is because a holder in due course can enforce payment in full for a negotiable instrument, however, they are only entitled to enforce the instrument according to its original terms, not any fraudulent alterations.

P and A are both liable for the alteration, as P consented to A's action, and B and C's liability would depend on additional factors not provided in the question.